Pre-harvest financing legislation to loosen the bind on Serbian farmers

On 25 November 2014, the Serbian Parliament adopted a new law on financing of agricultural production in Serbia. The law, promoted by the Ministry of Agriculture, will help farmers access finance in a pre-harvest period. The European Bank for Reconstruction and Development (EBRD), together with the FAO’s Investment Centre, provided technical support to the government of Serbia during the drafting of the law and the two institutions are now involved in supporting its implementation.

The rationale for the law is to allow farmers to use their production (crops, fruits, vegetables, etc.), before harvest, as collateral to obtain working capital credit from local banks and input suppliers.

The legislation adopted in Serbia is inspired by Brazil’s legislation on Cédula de Produto Rural (Certificates of Agricultural Products, or “CPRs”). CPRs are a simple and trusted financing tool, introduced by the Government of Brazil to fill the gap in financing that the banking sector could not meet.

Following a visit to Brazil in 2011, the Serbian Ministry of Agriculture examined the feasibility of the introduction of pre-harvest financing instruments in Serbia following the example of Brazil. The analysis demonstrated a strong demand for pre-harvest financing but a gap in existing legislation to specifically provide for secured pre-harvest financing instruments (contracts and collateral). FAO and EBRD were enlisted to provide technical assistance to a working group established by the Serbian Ministry of Agriculture to develop a draft law on pre-harvest financing – which was adopted this week.

FAO and the EBRD are now supporting the Ministry in implementing the legislation, in particular in establishing a transparent register for the new instrument and in training stakeholders and potential users of the new system. FAO and EBRD involvement on this project was funded under the EBRD Special Shareholders Fund.